A recent report indicated that rug pulls are one of crypto’s most pervasive scams. Rug pull tokens are explicitly programmed to steal from retail investors. Their smart contracts often include scripts that disable secondary sales, allow developers to mint new tokens, or charge buyers sell fees of 100%. Together, these tokens contribute to the hidden theft of hundreds of millions from crypto users.
The anatomy of a crypto rug pull
In most respects, rug pull tokens look just like any other cryptocurrency, abiding by their respective blockchains’ fungible token standard. Where they differ is in their source code. Over time though, scammers have learned how to make dozens of different modifications to their tokens’ underlying smart contracts. To execute rug pulls, scammers first hard-code exploitative rules into their tokens’ smart contracts that give them additional powers – or strip their buyers of basic privileges. Then, they deploy (i.e. publish) that token contract. After deploying their scam token, the scammer next creates a liquidity pool on a decentralized exchange (DEX). This establishes a trading pair between that token and a more popular, legitimate cryptocurrency, like Ethereum. They then generate artificial transaction volume to inflate that token’s perceived value.
DeFi scammers may attract even more investors by publishing a promotional website or roadmap, sharing fake partnerships or names of “doxxed” developers and advertising on…
